Yen Snaps 3-Day Rally as Japan’s Current-Account Deficit Widens

Jan. 14 (Bloomberg) -- The yen fell the most in four weeks
versus its U.S. peer after a government report showed Japan’s
current-account deficit widened to a record in November.

The dollar gained for the first time in four days as U.S.
retail sales rose more than forecast in December, giving the
world’s biggest economy a lift at the end of 2013. The Swedish
krona strengthened as a report showed inflation was faster in
December than economists forecast. South Africa’s rand slid to a
five-year low against the dollar on speculation labor disputes
at platinum producers will reduce exports.

“Dollar-yen is a bet everyone wants to be long on --
investors are buying on a dip because of the Japanese data,”
said Vassili Serebriakov, a foreign-exchange strategist at BNP
Paribas SA, by phone from New York. A long position is a bet an
asset, in this case the dollar, will appreciate. “The retail
sales report makes the payroll numbers look more one-off instead
of the economy looking to be on a soft patch.”

The yen fell 1.2 percent to 104.22 per dollar at 5 p.m. in
New York after plunging as much as 1.3 percent, the biggest drop
since Dec. 18. Japan’s currency slid 1.2 percent to 142.56 per
euro after appreciating to 140.50 yesterday, the strongest since
Dec. 6. The dollar closed at $1.3679 per euro.

The Bloomberg Dollar Spot Index rose 0.4 percent to
1,025.22 after falling 0.7 percent during the previous three
days. The gauge slid 0.4 percent on Jan. 10 when a government
report showed U.S. employers added fewer workers in December
than economists forecast.

Krona, Rand

The krona jumped to a two-month high against the euro after
Statistics Sweden said consumer prices rose 0.1 percent in
December from a year earlier. Economists surveyed by Bloomberg
predicted a 0.1 percent drop.

The Swedish currency advanced 1 percent to 8.8022 per euro
after appreciating to 8.7954, the strongest since Nov. 12. The
krona gained 1.1 percent to 6.4347 per dollar.

The rand declined as Statistics South Africa said growth in
mining output slowed to 5.1 percent in November from a revised
23 percent the previous month. The most powerful labor group at
the South Africa’s platinum mines, the Association of
Mineworkers and Construction Union, plans meetings with its
members this week to discuss striking over pay.

The rand traded fell 0.1 percent to 10.8338 per dollar
after sliding to 10.8952, the weakest level since October 2008.

Canada’s dollar fell to a four-year low amid speculation
the Bank of Canada may signal an interest-rate cut after reports
last week showed payrolls declined and the trade deficit
swelled. The central bank meets Jan. 22.

The loonie dropped 0.8 percent to C$1.0946 per dollar and
reached C$1.0959, the weakest since October 2009. It has fallen
3 percent versus the greenback this year, the most among 16
major currencies after the rand’s 3.2 percent slide.

Retail Sales

The dollar strengthened as U.S. retail purchases increased
0.2 percent after a 0.4 percent advance in November that was
smaller than previously reported, Commerce Department figures
showed today in Washington. The median forecast of 86 economists
surveyed by Bloomberg called for a 0.1 percent gain. Excluding
cars, demand jumped by the most in almost a year.

“The retail-sales number isn’t very good, but the market
doesn’t seem too bothered by that,” Fabian Eliasson, head of
U.S. currency sales in New York at Mizuho Financial Group Inc.,
said in a phone interview. “We should keep an eye on Japan’s
current account. If you look at the market, it is fairly
positioned for short dollar-yen as of last night, it seems like
it’s picking up a bit of a bottom here.”

Japan Shortfall

Japan posted a record 592.8 billion yen ($5.7 billion)
shortfall in its current account, the Ministry of Finance said
in Tokyo, larger than the median forecast of 368.9 billion yen
in a Bloomberg News survey of 24 economists. The deficit is the
biggest in comparable data back to 1985.

The yen tends to strengthen during periods of financial
turmoil because the nation has had an annual current-account
surplus since at least 1985, making it less reliant on foreign
capital.

“It’s a continuation of data out of Japan, supporting
dollar-yen higher,” Dan Dorrow, the head of research at Faros
Trading LLC in Stamford, Connecticut, said in a phone interview.
“The current-account deficit remains, that’s an underlying yen-negative flow.”

Money managers in Japan bought a net 1.48 trillion yen of
dollar bonds in November, separate data from the Finance
Ministry showed. The five-month stretch of net purchases was the
longest since the period ended October 2010.

Treasury 10-year notes yielded 2.21 percentage points more
than similar-maturity Japanese bonds, approaching the 2.30
percentage-point spread on Dec. 24 that was the widest since
February 2011 based on closing prices.

The yen has tumbled 13 percent in the past year, the worst
performer after Australia’s dollar among 10 developed-nation
currencies tracked by Bloomberg Correlation-Weighted Indexes.
The dollar rose 3.9 percent and the euro strengthened 7 percent.